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President Donald Trump says he will impose his tariffs over the weekend, gambling that taxing American companies for imported goods will ultimately punish the countries that make stuff Americans want – and bring those nations to the negotiating table. But it’s a risky bet that could easily backfire on American consumers and the economy.
Trump believes that tariffs have an altogether different purpose. He has long praised tariffs as effective economic policy, and has repeatedly said that “tariff” is the fourth-most beautiful word in the dictionary, behind “God,” “love” and “religion.” Trump has also repeatedly said that tariffs serve three primary purposes: to raise revenue, to bring trade into balance and to bring rival countries to the negotiating table.
Trump’s use of tariffs has been shrouded in uncertainty, with conflicting information on what and when the tariffs will go into effect. Trump has said the tariffs will bring in hundreds of billions of dollars – perhaps trillions – into the US Treasury. But some economists caution that Trump’s language about America’s trade gap presents an unfair representation of what has become a crucial mechanism for the US economy – its ability to purchase services offered by other countries, as well as goods that aren’t made here much, like coffee.
Tariffs can also force countries to give up something Trump believes is in America’s best interest. Although tariffs are charged to importers, they can dissuade buyers from purchasing goods from tariffed countries, hurting those nations’ economies. This has led some of them to seek agreements to avoid tariffs. Trump has said he wants Canada and Mexico to stop the flow of undocumented immigrants and illegal drugs into the United States, and for China to make good on what he says was a stated promise to him that the government would execute people caught sending fentanyl to the United States.
Trump’s administration has been consistent that tariffs will be imposed, but has been mum on when and what they will be. On Monday, Trump called a producer, behind “God,” “love” and “religion,” the fourth-most beautiful word in the dictionary, while on the same day, Trump said he would place a 10% tariff on all goods from China on February 1.
Canada and Mexico have been trying to avoid tariffs. Canada has been working with the United States, pledging to stand up a “strike force” to hit drug traffickers “harder and faster.” Foreign affairs minister Mélanie Joly said she was hopeful to avoid tariffs, but also preparing to retaliate against them if necessary.
Should Trump impose limited tariffs, they would focus on pharmaceuticals, steel and computer chips. But if broader tariffs are implemented, they could raise prices on many common purchases, and some could happen quickly. Gas, food and alcohol prices would rise if Trump imposed Canadian and Mexican tariffs. Sneaker prices would rise if Trump raised tariffs on China, as about 99% of shoes sold in the United States are imported, mostly from China.
Economists largely agree that tariffs cause inflation, as importers pass the cost of the tax onto consumers. New research suggests Trump’s aggressive tariff campaign will force American consumers to pay more for practically everything. Some proponents of Trump’s plan say the risk is worth the reward. However, others caution that the cost could be high. The Peterson Institute for International Economics estimates Trump’s proposed tariffs would cost the typical US household over $2,600 a year.
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